The controllers of Larkspur, Inc. and Blue Corp. both ask you whether their companies can reclassify short-term obligations as long- term. Here are the facts surrounding both companies' short-term debt. Larkspur, Inc. On December 31, 2017, Larkspur, Inc. has $2,440,000 of short-term debt in the form of notes payable to Michaels State Bank due February 5, 2018. On January 28, 2018, Larkspur issued 24,400 shares of common stock at $75 per share. Larkspur used the proceeds of $1,830,000 from the stock issuance, along with $793,000 in cash to retire the short-term debt and associated accrued interest on February 5, 2018. Larkspur will issue its December 31, 2017 financial statements on February 25, 2018. Blue Corp. On December 31, 2017, Blue Corp. has $3,660,000 of short-term notes payable to Indiana Bank & Trust. The notes are due on January 31, 2018. Blue retired the notes, along with $244,000 in accrued interest, in full on January 31, 2018. On February 11, 2018, Blue obtained $5,490,000 in long-term financing from Terre Haute Bank & Trust. The new debt bears interest at 5 percent, with interest payments due annually. Blue will issue its December 31, 2017 financial statements on February 28, 2018. Prepare partial balance sheets for Larkspur, Inc. and Blue Corp. at December 31, 2017, showing how both companies' short-term debt should be presented. (Enter account name only and do not provide descriptive information.)
The controllers of Larkspur, Inc. and Blue Corp. both ask you whether their companies can reclassify short-term obligations as long- term. Here are the facts surrounding both companies' short-term debt. Larkspur, Inc. On December 31, 2017, Larkspur, Inc. has $2,440,000 of short-term debt in the form of notes payable to Michaels State Bank due February 5, 2018. On January 28, 2018, Larkspur issued 24,400 shares of common stock at $75 per share. Larkspur used the proceeds of $1,830,000 from the stock issuance, along with $793,000 in cash to retire the short-term debt and associated accrued interest on February 5, 2018. Larkspur will issue its December 31, 2017 financial statements on February 25, 2018. Blue Corp. On December 31, 2017, Blue Corp. has $3,660,000 of short-term notes payable to Indiana Bank & Trust. The notes are due on January 31, 2018. Blue retired the notes, along with $244,000 in accrued interest, in full on January 31, 2018. On February 11, 2018, Blue obtained $5,490,000 in long-term financing from Terre Haute Bank & Trust. The new debt bears interest at 5 percent, with interest payments due annually. Blue will issue its December 31, 2017 financial statements on February 28, 2018. Prepare partial balance sheets for Larkspur, Inc. and Blue Corp. at December 31, 2017, showing how both companies' short-term debt should be presented. (Enter account name only and do not provide descriptive information.)
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 49P
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Transcribed Image Text:The controllers of Larkspur, Inc. and Blue Corp. both ask you whether their companies can reclassify short-term obligations as long-
term. Here are the facts surrounding both companies' short-term debt.
Larkspur, Inc. On December 31, 2017, Larkspur, Inc. has $2,440,000 of short-term debt in the form of notes payable to Michaels State
Bank due February 5, 2018. On January 28, 2018, Larkspur issued 24,400 shares of common stock at $75 per share. Larkspur used the
proceeds of $1,830,000 from the stock issuance, along with $793,000 in cash to retire the short-term debt and associated accrued
interest on February 5, 2018. Larkspur will issue its December 31, 2017 financial statements on February 25, 2018.
Blue Corp. On December 31, 2017, Blue Corp. has $3,660,000 of short-term notes payable to Indiana Bank & Trust. The notes are due
on January 31, 2018. Blue retired the notes, along with $244,000 in accrued interest, in full on January 31, 2018. On February 11,
2018, Blue obtained $5,490,000 in long-term financing from Terre Haute Bank & Trust. The new debt bears interest at 5 percent, with
interest payments due annually. Blue will issue its December 31, 2017 financial statements on February 28, 2018.
Prepare partial balance sheets for Larkspur, Inc. and Blue Corp. at December 31, 2017, showing how both companies' short-term debt
should be presented. (Enter account name only and do not provide descriptive information.)
Transcribed Image Text:Prepare partial balance sheets for Larkspur, Inc. and Blue Corp. at December 31, 2017, showing how both companies' short-term debt
should be presented. (Enter account name only and do not provide descriptive information.)
Larkspur, Inc.
Partial Balance Sheet
Blue Corp.
Partial Balance Sheet
$
%24
%24
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